Poland | Retail Market SHOPPING IN OFFICE BUILDINGS Q1 2018 Poland | Retail Market CONTENTS INTRODUCTION 3 THE WARSAW 4 OFFICE MARKET USERS’ 7 EXPECTATIONS RETAIL AND SERVICE 11 OUTLETS AMSTERDAM, FRANKFURT, 18 LONDON… Poland | Retail Market INTRODUCTION Warsaw’s office market has been developing rapidly since the 1990s – currently, almost 530,000 people work in approximately 500 modern office buildings in the city, spending often more than eight hours a day in them. What retail and service outlets, in terms of both size and quality, are provided to them by office buildings? Is it sufficient, especially given the highly competitive labour market in the capital? Is the list of commercial tenants in office buildings diversified? Which sectors, in addition to catering, are developing in these locations? And finally, is there any one ‘recipe’ for successful retail and services and does this function constitute added value in every case? Colliers International experts studied retail and service outlets in the capital’s office buildings in February and March 2018 and they looked at approximately 300 buildings (all that have commercial premises). We researched location by office zones, the number and size of units, tenants by sectors, vacancy and the level of rents and service fees. A survey, carried out on a sample of approximately 200 employees of Warsaw office buildings in March this year, is an integral part of our report. In the survey, we asked respondents about the quality of the existing retail and service outlets in their workplace and their expectations about them. The report also includes several examples of investments from Amsterdam, Frankfurt and London that show an innovative approach to complementary functions in office buildings, depending on their location. The report also contains statements from market practitioners. We encourage you to read our latest report. 3 RynekRetail Markethandlowy | SHOPPING | ZAKUPY IN W OFFICEBIUROWCU BUILDINGS | 2018 || 2018Colliers | ColliersInternational International Poland | Retail Market THE WARSAW OFFICE MARKET Last year, 27 office buildings were completed with a total area of over 275,000 m². At the end of 2017, the largest increase in stock was recorded by the following zones: Mokotów (72,300 m²) where 6 projects were completed, Żwirki i Wigury (62,200 m²) mainly as a result of the completion of the Business Garden office park (54,900 m²), and the City Centre (52,500 m²). The largest buildings completed in 2017 were the second stage of West Station (35,000 m²) on Jerozolimskie avenue, D48 (23,400 m²) in the Mokotów zone (Służewiec), the first buildings of the Generation Park X complex WARSAW OFFICE ZONES (20,100 m²) and the Bobrowiecka 8 project (20,000 m²). Development activity in the office sector in Warsaw is not slowing down. At the end of 2017, nearly 800,000 m2 of office space remained under construction. Gross demand recorded last year in the capital was at a high level, similar to the previous two years NorthN City Centre (2015-2016). The total transaction volume was 1 E above 820,000 m², which is an increase of 9% CBD East West 4 2 compared to 2016. Office absorption was also high W 5 3 – 341,000 m². Most lease agreements were signed 6 Jerozolimskie Mokotów in the following zones: City Centre (208,500 m²), Corridor US Mokotów (204,500 m²) and CBD (163,800 m²). SW 7 New contracts accounted for over 63% of demand, SE and pre-let transactions almost 18%. Ursynów, Żwirki i Wigury LS Wilanów Corridor Tenants’ interest in office space in Warsaw will continue to be high as the capital continues to attract new companies, and present tenants are Puławska Corridor renegotiating their agreements, often expanding their space. At the end of the fourth quarter • CBD – Central Business District • Mokotów 2017, the vacancy rate stood at 11.7%, which is • City Centre - (7) Służewiec a decrease of 2.5 p.p. compared to the end of - (1) City Centre North • North 2016. Most space was absorbed in the two central - (2) City Centre East • Puławska Corridor zones, where the decline amounted to 8.2 p.p. This - (3) City Centre South • Ursynów, Wilanów was due to the high level of demand and much - (4) City Centre West • West • East • Żwirki i Wigury Corridor lower new supply than in 2016. • Jerozolimskie Corridor - (5) Upper, (6) Lower Source: Colliers International, April 2018 4 RynekRetail Markethandlowy | SHOPPING | ZAKUPY IN W OFFICEBIUROWCU BUILDINGS | 2018 || 2018Colliers | ColliersInternational International Basic rents remained stable, with tenants paying will positively affect the demand for office space from EUR 17 to EUR 22/m²/month in the central zone and the quality of developments in the market. and EUR 12 to EUR 16/m²/month outside the centre. A derivative of this trend is an increase and The unemployment rate is low and employers are diversification in retail and service outlets in competing to acquire talented staff. A staff-friendly office buildings, both on the ground floors (cafés, office is now a motivational element for potential restaurants, stores) and on higher (fitness clubs, staff. The trend of changing work space and medical centres, canteens), and lower levels the business environment will strengthen, which (car washes, laundries). CEDET 5 Retail Market | SHOPPING IN OFFICE BUILDINGS | 2018 | Colliers International Once a simple canteen „(...) Once a simple canteen - today a well-equipped restaurant or bistro. Once a gray coffee machine with instant coffee - today a café with aromatic coffee and delicious home- made cake. More and more often small boutiques, beauty salons, a beautician, hairdresser, barber, and even a manicurist who are able to refresh our image at an express pace. Today, office buildings are more than just a space where you only work. The new generation of employees brings freshness and energy to companies, but it needs space to develop it. More and more companies are noticing that if they do not provide such a space, they will have problems with acquiring and retaining employees. MICHAŁ ŻELSKI Tenants who use these spaces on a daily basis want to have the same services that the city centre offers them. Therefore, in our office buildings, the ground floors are intended only SENIOR LEASING for services such: kindergartens where we can safely leave children under the professional MANAGER, care, shops in which we will arrange everyday shopping, restaurants where we meet ECHO INVESTMENT with friends, or various service points. According to today’s standards, this is a place for a moment of respite in a relaxed atmosphere, seeking inspiration or settling the mundane needs of everyday life. Employees in modern office buildings are welcomed by a friendly lobby, further invites to an appetizing restaurant, cosy café, energy gym or fitness club. What will be found in the common spaces depends precisely on the tastes of the tenants. We give our employees opportunity to say what they need to feel good in the place where they spend most of their day. We are open to such conversations, because in this way we learn how to respond to changing requirements and social needs. That’s how we gain the trust of our partners (...)”. Convenience shopping „(...) Carrefour Polska currently has 6 convenience format stores located in office buildings – two in Kraków, three in Warsaw and one in Łódź. Carrefour Express stores have an area of approximately 100 m2, and their range is tailored primarily to the needs of office workers, who are the main customers in these locations. These customers are loyal and they buy what they need in the store during the day. Dairy products, bread and other typical breakfast products as well as ready-to-eat food make up a large proportion of sales. Other popular products are more expensive purchases such as alcohols, chocolates and confectionary RONAN MARTIN, bought as gifts. To more accurately respond to the needs of office workers, the Bistro Express concept is OPERATION also available in our stores, where customers can buy hot dogs, home-made pizza, French DIRECTOR, fries and chicken strips as well as hot drinks. Customers can also heat up ready-made CARREFOUR POLSKA dishes bought in the store or pour boiling water into a soup or porridge, and then eat the meal on the spot using tables in the store. Shops located in office buildings are also visited by local residents and people passing the store on their way home or to work. Although, they are less frequent customers, their shopping basket is usually bigger. Due to the specificity of the location, these stores have a much lower turnover at weekends, when offices are closed. Therefore, opening hours on Saturdays and Sundays are much shorter, and some stores – such as the Kraków Carrefour Express at Czerwone Maki street – are completely closed (...)”. 6 Retail Market | SHOPPING IN OFFICE BUILDINGS | 2018 | Colliers International Poland | Retail Market USERS’ EXPECTATIONS Colliers International experts surveyed nearly 200 employees working in office buildings in Warsaw about their expectations in terms of commercial outlets in their workplaces. We asked what they use most often and what type of shopping they do, how much they spend on everyday shopping and what is missing to satisfy their needs during an eight-hour working day. In line with predictions, respondents use cafés, newsstands and canteens most often during the working day, followed by restaurants and grocery WHAT IS MISSING IN THE RETAIL AND SERVICE stores. Interestingly, women’s responses were OUTLETS IN THE OFFICE BUILDING WHERE YOU a little different to those of men. Women often use WORK? drugstores and banks during the working day, while men use banks and medical centre. The use of commercial outlets in office buildings also depends on the age of respondents.